IRS Issues Prop Regs on Use of PTINs After 2010

The IRS issued proposed regulations (REG-134235-08) on Wednesday that would require paid return preparers to use a preparer tax identification number (PTIN) on all tax returns after Dec. 31, 2010.

The proposed regulations are the first guidance issued by the IRS under its proposed plan to require registration of all paid return preparers. As part of that proposed plan, all paid return preparers would be required to obtain a PTIN from the IRS. (For prior coverage in the JofA, see “IRS Proposes New Requirements for Return Preparers.”)

IRC § 6109(a)(4) authorizes the IRS to require tax return preparers to furnish identifying numbers on any returns or refund claims they prepare. Treas. Reg. § 1.6109-2(a)(1) currently requires preparers to use either their Social Security number or a PTIN. The proposed regulations would change this requirement by no longer allowing the use of Social Security numbers; paid return preparers would be required to use a PTIN on all tax returns and refund claims.

Wednesday’s proposed regulations do not establish other elements of the proposed return preparer registration plan. Notably, they do not establish the requirements to become a registered tax return preparer.

The rules in the proposed regulations would become effective when they are finalized. The IRS recognizes that its proposed return preparer registration plan may not have been fully implemented by that time, so the proposed regulations allow the IRS to prescribe exceptions or transition rules to allow individuals to receive PTINs before the return preparer registration plan is fully implemented.

The proposed regulations provide a transition rule for returns due for tax periods that end before Jan. 1, 2011, where the return is not filed until after Dec. 31, 2010 (for example, Forms 1040 for calendar year 2010). On those returns, preparers should use the identifying number prescribed on the form being filed or its instructions.

The proposed regulations say that all tax return preparers must apply for a PTIN “at the time and in the manner” that will be prescribed in further IRS guidance or forms and instructions. The proposed regulations authorize the IRS to charge a fee in connection with the issuance or renewal of a PTIN.

The preamble to the proposed regulations says that after Dec. 31, 2010, to obtain a PTIN an individual will have to be a CPA, attorney, enrolled agent or registered return preparer under the proposed return preparer registration plan. As the IRS revealed when it first proposed mandatory registration of return preparers, under the proposed regulations, applying for a PTIN may subject a return preparer to a tax-compliance check, which could include a review of whether the individual has timely filed his or her personal and business tax returns and paid all tax due.

Under the proposed regulations, failure to include a PTIN on a return could subject a return preparer to penalties under IRC § 6695(c). That penalty is $50 for each failure to furnish a required identifying number, up to $25,000 in each calendar year.